The Income Tax commissioner could not amend an assessment only due to the detailed reasoning was not provided in the order, the Madras High Court ruled.
The Commissioner of Income Tax has been empowered u/s 263 of the Income Tax Act, 1961, to amend any order passed under the Income Tax Act, 1961, “the Act,” which is wrong insofar as it is prejudicial to the interest of the revenue.
Chief Justice Manindra Mohan Shrivastava and Justice Sunder Mohan express that, “an order cannot be termed as erroneous unless it is not in accordance with law. If the Income Tax Officer, acting in accordance with law, makes a certain assessment, the same cannot be branded as erroneous by the Commissioner, simply because, according to the Commissioner, the order should have been written more elaborately.”
The taxpayer is a partnership firm that is specified to be in the business of manufacturing and sale of kitchen utensils.
The Assessing Officer, amid the assessment, witnessed that the old building, which the taxpayer had sold, was purchased by him dated 04.01.1996, but for that building, no depreciation was claimed even though it is clearly carried out from the records that the property was purchased by the taxpayer from the Tamil Nadu State Industrial Development Corporation.
Assessing Officer, despite no claim for depreciation, it is regarded that the depreciation for the same building which was used for the objective of the business must be calculated and permitted for the earlier years themselves, and accordingly, the representative must again work for the claim on the depreciation allowable.
Under Section 263 of the Act Commissioner of Income Tax invoked jurisdiction against the assessment order passed under Section 143(3) read with Section 153C of the Act, only because the difference in the construction cost of the property between the claim of the taxpayer and Department valuation was not regarded, and thereafter, that long term capital gain on sale of old building was not acknowledged.
The assessee argued that the Commissioner of Income Tax was not justified in invoking jurisdiction under Section 263 of the Act. It was contended that the assessment was neither erroneous nor prejudicial to the Revenue’s interest. The assessee emphasised that the building’s use for business purposes was evident, as the land had been purchased from the Tamil Nadu State Industrial Development Corporation.
The bench stated that simply having an inquiry, even if it is inadequate, does not automatically provide grounds for the Commissioner to issue an order under Section 263 of the Act just because he holds a different opinion on the matter. Therefore, it cannot be considered a case of an incorrect order that is prejudicial to the interests of the Revenue.
The section does not specify a matter of substitution of the ruling of the Commissioner or that of the income tax officer, who passed the order, till the decision is said to be wrong.
A prima facie material on record to specify that the tax which was incorrectly qualified has not been levied or that by the incorrect application of the pertinent law on a wrong or incomplete interpretation, a lesser tax than what was just has been charged, the bench cited.
As per the bench, it could not be cited to be a matter of breach of any provision of law but seems to be a case of alleged incorrect inquiry instead of the absence of inquiry or material, desiring inference with the order that was carried via the assessing officer in the assessment proceedings, as per the notice u/s 153C of the Act.
The bench in the above said has permitted the appeal.
| Case Title | M/s.Arul Industries vs. The Asst. Commissioner of Income Tax |
| Case No. | TCA No.340 of 2016 |
| For Appellant | Mr.I.Dinesh and Mr.Philip George |
| For Respondent | Mr.J.Narayanaswamy |
| Madras High Court | Read Order |
